Euro crisis 'domino effect' fears hit German confidence

German companies are becoming more worried about the eurozone debt crisis, Ifo
economist Klaus Wohlrabe said on Friday after data showed business sentiment
declined in June for a second month running to its lowest level in over two
years.

'Until now Germany was really doing quite well,' said Ifo economist Klaus Wohlrabe after data showed business sentiment declined to its lowest level in over two years.

"At the moment I don't see a recession, rather a dip in the second and third quarter," he said, adding that GDP would only just remain in positive territory.

Mr Wohlrabe said 70 percent of the responses were collected before the Greek election, when there were concerns that a radical leftist party would win and that the heavily indebted country would then leave the eurozone.

"Uncertainty was particularly prominent then," Mr Wohlrabe said, adding that there were also concerns about Spain, which was a more important trade partner than Greece. Export expectations fell as a result.

"People were worried about a domino effect," he said.

Lower oil prices, which brought about lower inflation, were a bright spot, as was the special effect created by the Euro 2012 soccer tournament in which Germany is participating.

"The situation in the entertainment electronics sector has improved significantly," Wohlrabe said.

But he added that even expectations for this sector dropped because the tournament will end soon and there will be less demand for televisions again.